1. Brigitte Unger TNI 20071 Money Laundering, Tax Evasion, Capital Flight, Tax Havens, the Rule based and the Risk Based Approach: Keep it Simple by Brigitte Unger Paper prepared for the TNI Seminar on Money Laundering, Tax Evasion and Financial Regulation, 12th and 13th June 2007, Amsterdam, organized by Tom Blickman

2. Brigitte Unger TNI 20072 Overview: From the old to the new AML regime in Europe 1.Assessment of money laundering and tax policy a. Reporting, blacklisting, endangered groups, compliance to FATF recommendations, crime and proceeds, b. tax evasion c. tax havens d. Assessment and the change from the rule based to the risk based approach 2. Conceptual confusion about money laundering and tax evasion 3. Differen interpretations of actors to fill the gap 4. Possible solutions

3. Brigitte Unger TNI 20073 Amazon.com 110$ new 222$ second hand CAIMAN.com Amazon.co.uk 59,9 £ new 137 £ second hand Amazon.de 92 € new 194 € second hand

4. Brigitte Unger TNI 20074 Total numbers of unusual and suspicious transactions in the Netherlands in 2005 UnusualSuspicous Money Transfer Offices130.99229573 Traditional Reporters (Banks, Money Change Offices, Casino's, Credit Card Companies)36.1657511 of which Banks287004036 Traders with goods of high value3.7671086 Government (custom, tax authorities, supervising authority)472185 Free professions (lawyers, real estate agents..)227126 Total181.62338.481 1. a. Assessment of AML through reporting

5. Brigitte Unger TNI 20075 1. b. Blacklisting IMF list 1999 OECD Tax Havens 2000 FATF 2001 FATF 2002 FATF 2005 FATF 2006 72 US, CH EU-15: Lux A, Ire,NL, UK 37 Lux 23 Hungary Russia Ukraine 10 Only Europea n country: Ukraine 3 Nigeria Myanmar Nauru 0

6. Brigitte Unger TNI 20076 1.c. Assessment through compliance Source: Arnone and Paoan (2006)

7. Brigitte Unger TNI 20077 1.d. Another way of measuring compliance Ferwerda and Bosma 2006

8. Brigitte Unger TNI 20078 1.e. Index of Attractiveness

9. Brigitte Unger TNI 20079 1.e.Assessment of tax evasion

10. Brigitte Unger TNI 200710 1.f.Assessment of tax havens Number of double tax treaties (greater leverage effect) NL: 80-100, Belgium has 66, Denmark has 78 and the UK has 110. withholding tax on dividends, royalties and interest Tax exemptions Effective corporate tax and income tax rates Micro and macro calculations Problem of effective tax rates: Netherlands statutory corporate tax from 34% to 31% planned to go down to 25% Netherlands effective corporate tax rage: 1,7 % (SOMO) – 7% (Sinn) – 20% (de Mooij) – 30% (Report Dutch Min.F.)

11. Brigitte Unger TNI 200711 Special Purpose Entities gross transactions in billion Euro

12. Brigitte Unger TNI 200712 Assessment problems will increase when switching from a rule based to a risk based approach

13. Brigitte Unger TNI 200713 Type of Crime US Penal Code GermanyAustriaSwitzer land Nether lands Tax evasion x if US taxes on crime if from mix criminal non criminal Only business and criminal org. no no, misdeme anor,only if fraud FraudxOnly business and criminal org. Only business and criminal org xx 2. Conceptual Confusion

14. Brigitte Unger TNI 200714 2. Conceptual Confusion 1.With regard to money laundering and tax evasion 2.Third EU AML Directive effort to harmonize ML definition. But not for tax evasion ‘national souvereignty’

15. Brigitte Unger TNI 200715 3. Different interpretations to fill the gap Naylor: don’t question the background of the money. More difficulties to assess AML due to risk based approach is accompanied by simplification trends in implementation and enforcement. More freedom, more efficiency but more arbitrariness and less fairness Increased role of the courts instead of politics Van Waarden’s lawyocracy Eventually risk based approach will become again a rule based approach

16. Brigitte Unger TNI 200716 4. Possible solutions Should tax evasion be part of money laundering or of corruption? Keep it simple: A Tobin tax instead For Europe EU law is stronger than UN Convention (enforcement by Commission, Council, Court) UN Convention: problem of finding enough support by member countries New Council of Europe Convention on Laundering, Search, Seizure and Confiscation of the Proceeds from Crime and on the Financing of Terrorism of 2005 signed by 27 countries, ratified so far only by Romania and Albania. Soft law as a first step?

17. Brigitte Unger TNI 200717 Prof. Dr. Brigitte Unger Utrecht School of Economics Janskerkhof 12 3512BL Utrecht The Netherlands +31-(0)30-253-9809 B.Unger@econ.uu.nl THANK YOU !